Parts of Medicare

Medicare has 4 main parts, and they’re represented by letters A-D.

Medicare Part A

Medicare Part A is generally free, meaning you don’t have to pay a monthly premium. Part A covers hospital costs such as inpatient care and limited amounts of skilled nursing facility care. (more)

Medicare Part B

Medicare Part B has a monthly premium that inflates a bit each year. As of 2023, that premium is $164.90 per month. Part B covers medical costs, such as lab tests and surgeries. Medicare Part A and B work together to provide you with a somewhat comprehensive insurance plan. (more)

Medicare Part C

Medicare Part C is an alternative to Medicare Parts A and B. Part C, also known as Medicare Advantage, has a very low monthly premium and covers many different things, including everything Part A and B covers along with dental, vision, wellness programs, and sometimes prescription drug plans. This plan has major limitations, such as a small network of doctors and high deductibles and copayments. (more)

Medicare Part D

Medicare Part D has a monthly premium which varies from person to person. Part D covers prescription drug costs, which is why this part of Medicare is often referred to as “PDP,” short for Prescription Drug Plan. (more)

Medicare Part A

Medicare Part A covers your hospital insurance. Some examples of this coverage are:

• Hospital care
• Skilled nursing facility care (very limited and short-term)
• Nursing home care (very limited and short-term)
• Hospice (limited)
• Home health services (very limited and short-term)

Without a Medicare Supplement, you are responsible for a deductible, coinsurance, and copayments.

The nice part about Medicare Part A is there is generally no monthly premium. As long as you worked and paid Medicare taxes for at least 10 years (40 quarters), you won’t pay for this service. In most cases, you will be automatically enrolled in Part A when you turn 65, regardless if you’re retired or still working.

2023 Medicare Part A Costs

• $1,600 deductible
• Days 1-60: $0 coinsurance
• Days 61-90: $400 coinsurance
• Days 91+: $800 coinsurance per “lifetime reserve day,” which caps at 60 days
• Beyond lifetime reserve days: You pay all costs
  

Medicare Part B

Medicare Part B covers services that are medically necessary to treat diseases and conditions as well as preventative services. Some examples of services Part B cover are:

• Lab tests
• Surgery
• Doctor visits
• Clinical research
• Ambulance services
• Durable medical equipment
• Mental health
• Getting a second opinion before surgery
• Limited outpatient prescription drugs
• Wheelchairs and walkers

Read a comprehensive list of items, tests, and services Medicare Part B covers.

In general, you should enroll in Medicare Part B when you turn 65. However, more and more people choose to continue working past the age of 65, which means you won’t need Part B until you lose your employer’s health insurance.

The first time you can enroll in Part B is called the “Initial Enrollment Period.” This is a 7-month window that begins 3 months before you turn 65, the month of your 65th birthday, and 3 months after.

If you don’t enroll for Part B during the 7-month window, you’ll have to pay a late enrollment penalty. The exception to this rule is if you’re still on some kind of credible health coverage, such as your employer’s group health insurance.

Medicare Part B Costs

Medicare Part B does have a monthly premium, which is $164.90 per month as of 2023. If you make more than $97,000 by yourself or $194,000 as a couple, your monthly premium will be higher than that.

Medicare Part C

Medicare Advantage, offered by private insurance companies and approved by Medicare, provides health insurance coverage after you turn 65, but it’s different from regular Medicare. While there are many benefits to this option, it can be quite problematic.

6 Medicare Advantage Plan Choices:

1. Health Maintenance Organization (HMO) plans: In most HMOs, you can only go to doctors in your network (except in an urgent or emergency situation).
2. Preferred Provider Organization (PPO) plans: In a PPO, you pay less if you use doctors in your network. You usually pay more if you go outside of your network.
3. Private Fee-for-Service (PFFS) plans: PFFS plans are similar to Original Medicare in that you can generally go to any doctor as long as they accept the plan’s payment terms. The plan determines how much it will pay and how much you must pay when you get care.
4. Special Needs Plans (SNPs): SNPs provide specialized health care for specific groups of people, like those who have both Medicare and Medicaid, live in a nursing home, or have certain chronic medical conditions.
5. HMO Point-of-Service (HMOPOS) plans: HMO plans may allow you to get some services out-of-network for a higher copayment or coinsurance.
6. Medical Savings Account (MSA) plans: These plans combine a high-deductible health plan with a bank account. Medicare deposits money into the account (usually less than the deductible). You can use the money to pay for your health care services during the year. MSA plans don’t offer Medicare drug coverage. If you want drug coverage, you have to join a Medicare Prescription Drug Plan.
   

Medicare Part D | Prescription Drug Plans (PDP)

Medicare Part D is prescription drug coverage, which Parts A and B don’t cover. Part D is available to everyone that has Medicare. Medicare Part D is optional, but if you decide not to get it, there are late enrollment penalties involved.

Prescription drug plans cover most prescriptions, but each drug plan has its own list of covered drugs. In addition, most drug plans place drugs into “tiers,” and each tier has a different cost. The lowest tier is the least expensive while the highest tier is the most expensive.

To choose a drug plan, go to Medicare.gov, and click “Find health & drug plans.” If you get stuck, download our cheat sheet, which has screenshots and explanations of each step along the way.

When choosing a drug plan, you ideally want to search for a balance of the cheapest carrier vs. the carrier with the highest ranking. Carriers with low ratings are often culprits of raising their drug prices throughout the year.

Medicare Part D Costs

Part D drug costs vary wildly depending on the following factors:

• Which drugs you take
• The plan you choose
• Which pharmacy you go to

In essence, the more drugs you take, the more expensive your premium will be. There are dozens of different insurance carriers to choose from, and they all have different prices. You can easily compare what your individual plan would cost by doing a comparison on Medicare.gov.

Please know that a lower monthly premium does not mean a cheaper drug plan. Medicare.gov’s comparisons will show you the total cost for the year, which is what you want to compare. Often times, a drug plan will have a higher premium, but a lower yearly cost.

The other major cost factor is the late enrollment penalty. The window where you may sign up for a drug plan is during your Initial Enrollment Period (the 7-month window around your 65th birthday).

If you choose not to sign up for a Part D drug plan – perhaps you don’t take any prescriptions – the penalty is 1% of the national base beneficiary premium multiplied by the number of months you didn’t have Part D drug coverage (or any other credible coverage). You then round up or down to the nearest 10 cents.